UPDATE: Moody’s worsens outlook on Russian banking system over virus
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MOSCOW, Apr 8 (PRIME) -- International rating agency Moody’s has worsened its outlook on Russia’s banking sector to negative from stable due to the spread of coronavirus and a slump in oil prices, the agency said in a report on Wednesday.
The outlook is changed for the next 12 to 18 months and the move reflects the agency’s view that the coronavirus outbreak and the recent slump in oil prices will undermine the economic activity and hurt the quality of assets and the banks’ profitability, the agency said.
According to Moody’s, the operating environment for banks in Russia will worsen as economic growth will almost stop.
Russia’s gross domestic product (GDP) is unlikely to grow in 2020 due to low oil prices and closure of businesses aimed at limiting social contacts to contain the spread of the coronavirus epidemic, the agency said.
Moody’s also said that the share of non-performing loans in Russia’s banking sector will double to 20% by the end of 2020 from 10% as of the end of 2019 due to deterioration of the economic situation.
In the consumer lending sector, the share of problem loans will rise by 10 percentage points to around 15%, and in the mortgage sector, the share of problem loans will stay within 5%.
The agency also expects coverage of non-performing loans by reserves for impairment to decrease to 50–60% from almost 80% as of the end of 2019 because the rise of such reserves will fall behind the growth of bad loans.